The dollar saw a mostly lower performance as market participants anticipated U.S. durable goods orders and crucial inflation data later in the week, which could offer insights into the Federal Reserve’s potential timeline for interest rate adjustments.
The dollar index, gauging the greenback against a basket of currencies, edged down 0.2% to 103.78, while the U.S. currency strengthened slightly against the Japanese yen to 150.71.
Cryptocurrencies experienced notable movements, with ether rising by 8% to $3,177, and bitcoin gaining 6.89% to reach $54,506.
Investors are eagerly awaiting U.S. durable goods data scheduled for Tuesday, along with the release of January’s U.S. personal consumption expenditures price index on Thursday, considered the Fed’s preferred measure of inflation.
The market has adjusted its expectations for the size and timing of potential Fed rate cuts, as the robust U.S. economy continues to play a role in decision-making. Strong U.S. consumer and producer price data has led to the postponement of rate cut expectations from May to June, as indicated by CME’s FedWatch Tool.
Additional inflation figures are anticipated from the euro zone, Japan, and Australia this week, alongside the Reserve Bank of New Zealand’s rate decision and China’s PMI surveys.
The relationship between U.S. yields and the dollar/yen pair is considered a key factor in the market, with cautious sentiment prevailing. Analysts believe that weak economic data may become more prominent, starting with the release of durable goods orders on Tuesday.
On the geopolitical front, Japan’s nationwide consumer prices are expected on Tuesday, with forecasted core inflation slowing to an annual rate of 1.8% in January, the lowest since March 2022. This potential slowdown complicates the Bank of Japan’s plans to end negative interest rates in the coming months.
Meanwhile, the euro exhibited strength, gaining 0.3% against the dollar to reach $1.0852. European Central Bank officials have emphasized their focus on inflation in the euro zone, particularly in the service sector and wage growth. The narrowing gap between U.S. and euro zone interest rate expectations has contributed to the euro’s recent strength, erasing the previously notable disparity. Only two weeks ago, investors expected a significant rate cut from the Fed compared to the European Central Bank, but this gap has now nearly disappeared.